good afternoon welcome to capital account i'm lauren lyster here in washington d.c. these are your headlines for monday november twenty sixth two thousand and twelve egypt's president mohamed morsi today is reportedly standing behind a series of decrees he issued last week they granted new powers putting him above any oversight now this sent tens of thousands into the streets and sent the egyptian stock markets lungeing bloomberg reports the most since january of two thousand and eleven when the arab spring uprisings began in egypt so we'll talk to an egyptian investment firm managing director to put it in context and is there any connection between say protests in egypt and as a session movement in catalonia there's been a cattle on drive for independence from spain separatist saw gains in regional

elections over the weekend is there a common economic gain underpinning unrest from egypt to spain to the u.s. are we going to see more of this we'll talk to michael krieger of liberty blitzkrieg plus it is this shopping day known as cyber monday today in the u.s. and we saw footage of money quickly changing hands over the weekend fueled by black friday deals but don't be fooled the velocity of money in the economy as at historic lows will break it down and word of the day let's get to today's capital account. egypt has seen tensions rise again in recent days with thousands hitting the streets after egypt's president mohamed morsi gave himself new powers by decree

last thursday now morsi declared himself above judicial oversight leading to a reported political crisis and today morsi reportedly told the country's top judges he is standing within his rights with those decrees now this has all drawn top headlines but look too at the broader financial crises egypt has paid the benchmark stock index plunged nine point six percent after this decree was issued the worst drop since the arab spring uprisings that ousted hosni mubarak in january of two thousand and eleven according to bloomberg now it was the world's best performing exchange this year not anymore and a country that needs outside investment are usually need stability to lure investors is getting farther from it at least according to a managing director of an egyptian investment firm i spoke to earlier in cairo. the only people who are going. to be.

in for political. and in terms of political pull and who may be investing to get it qatar has been a major player also turkey of course the u.s. and iran has reportedly been investing and the return on investment these governments are looking for exactly remains murky to someone like whole warre and multibillion dollar investment surrounding the suez canal a key strategic waterway it's right there in the case of cut or have some worried according to media reports about egypt's sovereignty and what has been the backdrop upon which all of the unrest on the streets of egypt has been built according to some. it's all about the economy it has been about the economy since the very beginning. twenty fifth of jan revolution wouldn't have been the best if the economic economic conditions were better. and there is one trend we have

seen and many more regions than just egypt is this a common theme in fact whether it's catalonians wanting to secede from spain or wal-mart workers striking for higher wages in the u.s. michael craig is here to tell us what he thinks he is principal of creature asset manager many also the popular blogger and we're so happy to have you in studio thanks for being here it's great to be here lauren thanks for having me it's very sad how you so do you think there is a common theme among do seem very desperate obviously everyone has their own political reality whether it's egypt or spain but is there a common theme between what we're seeing again in egypt with people protesting and catalonia where the secession movement appears to be gaining steam i mean members of the secessionist party the separatists they gained i think they doubled their seats and in the assembly over the weekend in the region right that's correct so the way i look at it is actually that these aren't isn't so much that they're linked to one big thing it's that there's symptoms of an actual breakdown of the

global monetary system basically run by the petrodollar and controlled by the federal reserve ben bernanke so what you see is a lot of underlying problems that have been festering for really decades independence in catalonia even hundreds of years egypt oppression north africa all these things are sort of bubbling to the surface now when there's opportunity because the global system is breaking down and that's sort of how i see it so in other words you basically have all these fissures that have been that have been percolating and just getting ready to explode and now now when people feel like they don't have as much to lose or they feel like there's that sort of opportunity to going out in the streets and try to take what freedoms they feel have been held back from them in the past and how do you connect something like ben bernanke is monetary policy though to the protests in egypt or anti austerity protests in spain how do you really connect those dots well ok so so i think the reaction the panic reaction by bernanke and a lot of the central banks just create more and more money is has been

a result again of sort of the collapsed. the system itself and then this is led to food prices food prices going up commodity prices going up as you know is well documented a lot of the reaction in north africa was a result of food prices and commodity prices escalating out of control and what happened after that was were governments of the regime like saudi arabia kuwait stepped subsidies and free food and checks to their people to try to calm things down so to me again it's all it's all a function of too much money not enough productivity and then commodity prices going up which then look when people don't have anything to eat and they feel like they have nothing to lose it's that old saying you know you go for it and that's what's happening in the again in the periphery of sort of the petro dollar empire and that's why it hasn't hit america just yet because we're the center of it so it doesn't get to rome first let's say but it's in the it's in the outskirts ok so and so how close do you think it's getting to rome looking forward i mean we just had it an enormous drought in the united states the worst in sixty years. and that will

affect food prices of course in the u.s. we don't pay that doesn't register and what we pay in the register quite as much as it does in a country that you're directly buying wheat if you're if you're a consumer so what do you think that these trends are going to look like in two thousand and thirteen right what i found so interesting about two thousand and twelve is that you started seeing some of the bigger economies that people thought were bullet proof really start to crack china being being a prime example in that economy who knows really what the real growth rate is i think it's close it's been close to zero recently if you if you really strip out inflation and get to the real numbers that's interesting though because i mean recently we've seen for example as the eurozone has deteriorated and gone back into recession and seen manufacturing. measures decline we've seen china's rebound again so i mean i think a lot of people are thinking that concern over china is not as much of a concern anymore or do you disagree well no i think it's fair to say that perhaps china is sort of stabilizing at a lower growth rate what their growth rate is remains to be seen think that's true but the but the key is that the prior perceived notion that china. untouchable ten

percent real g.d.p. growth yeah it's sort of been shot now and but about the united states i mean you mentioned you mentioned the drought this year earlier in the summer there was an interesting article from reuters talking about how food banks in the united states are running very low on supplies and that actually it's interesting because that's a function of the fact that the federal government will normally buy the excess food supply. to support prices and also soak up the product and then they will distribute that to food banks in the poor later but food banks have low supplies now because the government was not able to buy because there was such a supply shortage in the drought so if food spikes prices where are high enough food spikes do you think it could be a problem in the u i think it always comes down to sort of the necessities of life being squeezed out of you when you when you start to see real social unrest and so a combination of oil and food could be an issue in two thousand and thirteen i think it's interesting just to get more philosophically into what you're talking

about with the food banks it's an interesting thing because food banks don't have as much food on their shelves because of the government but not exactly in the way that you would think it kind of is by product that the government subsidizes farmers by buying food to boost up the prices and then they give that food to food banks but since prices are higher because of the drought this year they haven't purchased as much food bought as much many commodities so that's why the food banks have less food on their shelves so how do you even untangle something like that because someone like you i imagine as a libertarian you'd be like get the government out of subsidizing farmers fine but there are all these bizarre unintended consequences by how involved the government is in everything at this point so how do you want tangle that all the plug or do you i mean that's that's a great philosophical question in the sense and that's why i don't really focus on you know sort of government subsidies and food stamps and farm subsidies as my core issues because yeah that's a problem but again it's not the big problem you know the big problem in my opinion is the federal reserve control and trying to micromanage centrally planned economy

the too big to fail banks that can do whatever they. and then get away with it i mean those are the big macro issues as far as government and big sort of crony business ruining the economy and the other stuff is sort of just payoffs so so i actually i believe that too big to fail they actually love the food stamp programs because it just keeps keeps the sort of disenfranchised masses quiet while they continue their scams and that's and so that's why those are my big issues so to me to untangle things is you actually put in a market economy and stop trying to centrally planned everything ok so kind of start at the top and deal with that in those big issues before you worry about you know correct taken the food stamps away from the people who need that help the most enduring or getting hurt by the too big to fail yes and the way that things have shaken out now one of the kind of issues in the u.s. that you thought may be a tipping point for still a virus terry has been what's been going on with wal-mart workers you're writing about that so they did protest over black friday and this is a strike in a movement it's been going on a little longer but that's take a look at

a little what we saw on black friday. some wal-mart employees didn't show up for work demanding higher paid less expensive benefits and better treatment from the company. so now though we did see protests across the country reportedly i think at a thousand wal-mart and one hundred cities wal-mart says only about fifty employees actually turned out and missed work and participated and this is a company that employs more than a million store associates so why don't you think we saw more participation yeah so on that front i mean i do think it's important a couple months ago it was the first multistory strike in wal-mart's history so i do think that's an important turning point however the reason why i think it was sort of a dud the black friday protests is because we have not yet in the united states reached that what i would call the tipping point of pain that you've seen in other countries like in southern europe particularly greece where it behooves you as

a struggling sort of underpaid worker to get out in the streets and really kind of risk it all to make things better because you sort of don't have anything to lose anymore in the us it's like i think people are trying to balance you know putting food on the table and i have a job when the economy's bad things are ok with really really being the person to get out there and and stir up trouble and so we're just not at that tipping point yet i think of where we're people feel like they don't have anything left to lose and they may as well just go take the chance i think that's coming in next year but we'll see if you think it is coming i think we're going to start to see much i think we're going to see a much much bigger civil unrest and protests in general in two thousand and thirteen and then based on what i think will be the catalyst for a few things i mean one could be the food situation the food bank situation which we discussed the other could be that so much was thrown at this economy in the election year two thousand and twelve and two thousand and eleven to get to get reelected this is a common practice that's done throughout the world by an incumbent now that obama

has his second term you know i just i just think he's still going to try to keep things together but the incentive to really throw everything at the problem every single moment isn't there like it was before so i think i think i think things are just going to get harder in general we will. the n word to the fiscal cliff we beat that up a lot on the show though so we're going to talk with you about some more things after the break more of michael kroger in a moment also still ahead right here money velocity is at historic lows what it means and why it matters inboard of the day and loose change turkey pays its bills to run in gold but first your closing market numbers.

parents versus social workers document being the last stop you and me the lands damn good many children have become prizes to find why does the long threaten families of the social for reducing the theme of they have right of the whole minimal me facing but they have any kind of for suspicion about the world will feel for your children are often just better at bringing up kids than their own mum and dad. using what we have an industry that is so. close and try to pull the lever for true too.

before the break we were talking about the government's role in distorting the economy we're talking about farm subsidies we were talking about the fed i don't know if people realize how involved the government still is in housing let's listen to the mortgage professional barry have been talking about it. a third of the transactions that we see happening in the housing market are going through harder going through government programs like f.h.a. and v.a. if those were to become more restrictive or if those were to become more difficult to obtain it would have an impact on the housing market that would be far reaching it would have effects in every aspect of our economy psychologically economically

it would be. tough times. and as we see so many have lines about housing recovery at the same time we just recently saw a headline that the f.h.a. faces the deficit and they need a bailout so what is the true nature of the housing market right now and so-called recovery that's what i want to ask michael kroger principal of creator asset management also he writes at liberty blitzkrieg so given the government's role in housing given that the f.h.a. may need a bailout what do you think is a the true nature of the housing market and the what's going to happen with any so-called recovery ok so first of all as far as the f.h.a. the federal housing administration that's in it was a great story the wall street journal the other day talking about how you know nine out of ten mortgages are being rejected now go through a government agency out and i don't know and i think people will be surprised to hear that after two thousand and eight you know i mean but but so the f.h.a. it was surprising to me the f.h.a. basically with what they historically what their role was supposed to be was to provide assistance to low income players in housing and of course they picked up

that role after fannie and freddie weren't able to in the in the housing bust and they've done that so as a result they've been allowing three percent down payment loans again and a lot of cases these are two people that are sub prime and so now what you found is there delinquencies have spiked up to nine point six percent out of their one trillion in mortgages that they that they insure and so if if this backstop to the housing market the f.h.a. which has been so important to this housing bounce that the government and ben bernanke you're trying to create and they're now in trouble or may need assistance you know you know what's who's going to come in sweep up and take over their role if they can't do it any longer so so that worries me and i think what people really don't understand is the fact that we are absolutely what we've been doing since the bust is we're doing the same thing it's basically zero down payment subprime housing market and then the other side of it is just a lot of investors that have been coming in and buying to rent but oxes if which was one of the first players to come into this is actually trying to sell their

properties because their returns from buying to rent. i've actually been very disappointing so i think we're sort of at the tail end of this balance and i also think that generationally speaking i think you're going to have parents parents and their children and their grandchildren live under one roof would be more common here and that will hurt the market we've seen some reports of boomerang parents today cosigned on student loans then are in trouble or can't pay them maybe it defaulted moving back in with their kids so these are different issues that we didn't see to this extent years ago so it will be interesting to see i do want to ask you you know there are some obviously these are tough times it's tough to find new revenue streams for for government coffers to one thing we've seen in states like your state where you live colorado is that citizens voted to legalize marijuana now this is something that could be a boon to the economy in the sense that new business and also it allows government to tax and regulate it as opposed to you know paying just to police it so what do you think are going to be though the most key kind of regulatory tax and legal

issues looking out over how this is implemented we have a couple things with that so first of all it's interesting it was a blow out in colorado amendment sixty four passed with fifty five percent approval so that's that's a that's a big margin of victory to legalize marijuana the second part of it is that actually the amendment got more votes than obama got in colorado so i think that's an interesting little fact and then as far as you know taxing and regulation the first forty million of excise taxes under this under the amendment will actually go to a public school systems fund so people need to think about things like this as well whereas a lot of this money right now or all of this money is essentially going to drug gangs and cartels sixty thousand people were killed in mexico in the last six years based on drug violence this money is not going to their coffers any more it's going to be going to potentially public schools so i think that's a great thing we'll see what the feds decide to do on this eric holder has been in the past very critical of similar amendments and initiatives so we'll see if they come in crackdown but the people of colorado spoken and will be interesting to see if if we implement if we can implement it without

a hitch. i don't think we have much time to get into this but i we did get to touch on it it's interesting that the banks apparently don't know what to do if they're allowed to allow marijuana growers or businesses to bank with them because they could be violating federal regulations about money laundering and they might violate these laws and they might lose their charters were made to be seen is if the federal government can and can exercise federal law through the banking system could be interesting to watch but we're going to leave it there for today thanks michael krieger so much. time now for word of the day when we break down a financial term or concept for our very smart viewer but just maybe not the financial expert and as you know the hunt for holiday deals is on in the u.s. as cyber monday sales are reportedly expected to break records and of course we saw

last week black friday shoppers storm retail stores. while people were making a mad dash for stuff the money may seem to be flying out of people's hands as they do so it may seem to have the lost city but the actual velocity of money has been at historic lows which is why some are warning the u.s. economy is set for another sharp slowdown and which is why money velocity is our word of the day so what exactly is it and how does it work money velocity let's take a look at the definition is the rate at which money is exchanged from one transaction to another and how much a unit of currency is used in a given period of time so money velocity is essentially the rate at which money changes hands but let's look at an example suppose in a small economy there is a builder a farmer and a mechanic and the builder pays the farmer one hundred dollars for some weight then

the farmer may turn around and pay sixty dollars for some tractor maintenance and then the mechanic may pay the builder forty bucks for some housing repairs so in this case the original one hundred dollars was used to pay for a total of two hundred dollars of goods and services by changing hands so the velocity is too because one hundred bucks generated two hundred bucks worth of goods and services so now you can see how this might generate inflation because the more people are spending the higher the velocity which means more money in circulation which can lead to price increases now if these increases in price become pronounced i.e. inflation expectations increase then this can further increase the velocity of money thereby creating a feedback loop sending prices even higher now we should note that some schools of thought believe money velocity causes inflation while others think it is the result of inflation is jim markers described in currency wars money velocity is heavily influenced by psychological factors the last city is

a mirror of the consumer's confidence or fear and it can be highly. volatile and like any psychological variable it is not in the direct control of policy makers of our central planning friend so it's important to consider how economists calculate the velocity of money too because this plays into it they do it by taking the ratio g.d.p. to m two money supply but let's look at some graphs so you can see so here we have the measure of m. two since one thousand nine hundred eighty let's take a look at that so there you can see it's on the up and up but look let's take a look at the changes of the broader measurement to the money supply of m two because what you can see is that the increase in money supply is not necessarily predictive of the two velocities so this raises questions about whether putting more money into circulation in the current environment can actually have much of an impact on the velocity now the fed a has of course been making this effort by printing money but it's only had a modest effect. the velocity of money is extremely low it's plunged in the united

states it is the all time record low in europe it's approaching record low in china even it's approaching record low so when the velocity of money so the putting or the central banks are putting money to help grease the wheels of the economy it's not getting traction we're going to put out twice as much just to get a little bit. what do you know and hey should we even buy into the dogma that g.d.p. over and two is a valid measure of velocity of money what if the money is exchanged in a way that doesn't impact the g.d.p. we need to keep in mind that these calculations are just surrogate markers for the rate of circulation of money calculations that could be seriously flawed so even with thanksgiving shoppers shelling out for cheap gadgets faster than you can say door buster adding up to thirteen percent more in total spending the last year according to the national retail federation remember money velocity is actually very low and now you know why it matters.

ok let's wrap up with loose change dimitri kofi and as our producer is here to talk about iran. the u.s. and its allies are trying to force iran's leaders to abandon their nuclear program they're using sanctions that include an oil embargo and bans on transactions with the iranian central bank. so there is a typical mainstream headline you would have seen over the past year or more having to do with u.s. sanctions against iran well how about this though here's an unintended consequence turkey on friday acknowledged a surge in his gold exports this year is related to payments for imports of iranian

natural gas so this is a way that iran has been able to bypass sanctions but does it just move gold more into the arena of a monetary metal they're using gold's of pay for resources actually this rather than give give more credibility to gold as a monetary metal i think it just shows that it is a monetary amount it is a monetary metal period particularly used for that peculiar type of monetary metal one that can be used to safeguard the user from any sort of to college her an overreach by anyone whether it's the domestic government or whether it's an international imperial force so it's the same reason that americans might use or buy gold prices that they think may be higher than what they'll be in six or twelve months they may want to safeguard their property they're afraid that someone might try to you know take their money freezer account whatever it is so they use gold the same reason that they use art it's like certain things that they contribute gold is the best of all so they're taking payment in gold i think that that's

a very very interesting analysis so now i actually i think that was pretty smart to me. i don't know i don't know what to say after that nothing i can add so we'll leave it there. i don't know about that but we'll leave it there we're not giving investment advice on this show but you can go check it out whatever you want to best because that's all we have time for thank you so much for watching and be sure to come back tomorrow in the mean time you know you can follow me on twitter at lauren lyster you can watch our show see any missed give us feedback as you know we respond to it every week on our you tube page and you tube dot com slash capital account you can watch us an h.d. on hulu it hulu dot com slash. capital dash account we have a packed waco shows a lots of new gas this week so you'll want to change every day but for now from everyone here have a great night. and. hope

all. is.